Cost Accounting (BCOC-138): Records, Material Control, Labour Turnover & Overheads: 60 flashcards
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1. What are the two main purposes served by cost accounting records?
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Planning (estimates, budgets, quotations) and control (variance analysis, corrective action).
2. How do cost accounts differ from financial accounts in terms of profit reporting?
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Financial accounts report overall profit; cost accounts report profit by product, department, or job.
3. List any three functions of a cost accountant.
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Installs cost system, prepares cost statements, assists in budgeting, advises on pricing and profitability.
4. What is the guiding principle for choosing an apportionment basis?
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Benefit received by the department.
5. Define allocation.
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Charging a cost wholly and directly to one cost centre because it was incurred for that centre alone.
6. Define apportionment.
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Dividing a common cost among several cost centres on an equitable basis.
7. What is ABC analysis?
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Classification of inventory by value and usage: A items high value tight control, C items low value loose control.
8. Under FIFO, how is closing stock valued?
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At the most recent purchase prices.
9. Under LIFO, how is closing stock valued?
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At the oldest purchase prices.
10. In rising prices, which method gives lower issue cost: FIFO or LIFO?
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FIFO gives lower issue cost because older, cheaper prices are issued first.
11. State the formula for labour turnover rate.
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$$\text{Labour turnover rate} = \frac{\text{Number of replacements}}{\text{Average number of workers}} \times 100$$
12. List any three causes of labour turnover.
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Low wages, poor working conditions, lack of promotion, poor supervision, personal reasons.
13. List any three remedies for labour turnover.
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Fair wages, better working conditions, training and career development, employee participation, proper selection.
14. What is the difference between apportionment and reapportionment?
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Apportionment divides common overheads among all departments; reapportionment pushes service department costs to production departments.
15. Name four common bases for overhead apportionment.
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Floor area, machine hours, direct labour hours, number of workers, asset value, horsepower.
16. What does a cost sheet show?
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Cost per unit and profit per unit for a product.
17. What is the purpose of a process account?
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To apportion joint costs between joint products such as A and B.
18. What does a contract account track?
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Material, labour, plant and work certified for a construction contract.
19. How is cost per kilometre for a vehicle calculated?
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By combining fixed costs (licence, insurance, garage rent, driver wages) with variable costs (petrol, tyres, maintenance).
20. What are the stages of a material control system?
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Purchase, receipt, storage, recording, issue, verification.
21. What is a bin card?
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A record kept in the store showing quantity of materials received, issued, and balance.
22. What is a stores ledger?
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A record showing both quantity and value of materials received, issued, and balance.
23. What is the Pareto principle in the context of ABC analysis?
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A small fraction of items accounts for most of the value, so control effort should focus on high-value items.
24. Give an example of a cost that would be allocated, not apportioned.
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Depreciation of a machine used only in Department A.
25. Give an example of a cost that would be apportioned.
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Factory rent split among departments by floor area.
26. What is the formula for issue cost under FIFO when 100 units @ ₹10 and 100 units @ ₹12 are bought and 120 units issued?
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$$(100 \times 10) + (20 \times 12) = 1,240$$
27. What is the formula for issue cost under LIFO for the same data (100 @ ₹10, 100 @ ₹12, issue 120)?
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$$(100 \times 12) + (20 \times 10) = 1,400$$
28. What is the closing stock value under FIFO for 100 @ ₹10, 100 @ ₹12, issue 120?
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80 units × ₹12 = ₹960.
29. What is the closing stock value under LIFO for 100 @ ₹10, 100 @ ₹12, issue 120?
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80 units × ₹10 = ₹800.
30. Why is high labour turnover costly even if not visible on payroll?
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Recruitment, training, lower productivity of new workers, scrap and accidents all rise.
31. What is the first step in installing a cost accounting system?
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Design cost centres and reporting formats.
32. How does cost accounting help in pricing decisions?
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It supplies cost data behind tender prices, transfer prices and product-mix decisions.
33. What is the difference between planning and control in cost accounting?
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Planning uses estimates and budgets; control compares actuals to standards and takes corrective action.
34. What is a material requisition?
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A document used to request issue of materials from stores.
35. What is a goods received note?
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A document prepared on receipt of materials recording quantity and condition.
36. What is stock verification?
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Periodic physical counting of stock and reconciliation with records.
37. Name two service departments whose costs are reapportioned to production departments.
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Maintenance and stores (or canteen).
38. What is the formula for labour turnover using average number of workers?
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$$\frac{\text{Replacements}}{\text{Average workers}} \times 100$$
39. Give one example of a fixed cost in vehicle cost per kilometre.
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Insurance (or licence, garage rent, driver wages).
40. Give one example of a variable cost in vehicle cost per kilometre.
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Petrol (or tyres, maintenance).
41. What is the key difference between financial and cost accounting regarding profit analysis?
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Financial accounting gives overall profit; cost accounting gives profit by product, department, or job.
42. Why is ABC analysis useful for managerial effort?
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It directs control effort to high-value items, avoiding waste on low-value items.
43. What is the effect of rising prices on FIFO vs LIFO closing stock value?
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FIFO gives higher closing stock value; LIFO gives lower.
44. What is the effect of rising prices on FIFO vs LIFO issue cost?
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FIFO gives lower issue cost; LIFO gives higher.
45. What is the purpose of a purchase requisition?
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To formally request purchase of materials by the stores or user department.
46. What is the role of inspection in material control?
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To check quality and quantity of materials received before acceptance.
47. What is the difference between bin card and stores ledger?
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Bin card records quantity only; stores ledger records quantity and value.
48. What is the formula for reapportionment of service department costs?
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Service department costs are distributed to production departments on a suitable basis reflecting benefit received.
49. What is the main objective of cost accounting?
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To provide detailed cost information for planning, control, and decision-making.
50. What is a cost centre?
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A location, person, or item of equipment for which costs are ascertained and used for control.
51. What is the difference between direct and indirect costs?
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Direct costs are traceable to a cost object; indirect costs are common and apportioned.
52. What is the purpose of a cost sheet in pricing?
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It shows cost per unit, which forms the basis for setting selling price and profit margin.
53. What is the treatment of plant in a contract account?
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Plant is recorded at cost and depreciated; depreciation is charged to the contract.
54. What is work certified in a contract account?
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Value of work completed and approved by the contractee's architect or engineer.
55. What is the formula for labour turnover using separation method?
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$$\frac{\text{Separations}}{\text{Average workers}} \times 100$$
56. What is the formula for labour turnover using replacement method?
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$$\frac{\text{Replacements}}{\text{Average workers}} \times 100$$
57. What is the formula for labour turnover using flux method?
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$$\frac{\text{Separations} + \text{Replacements}}{\text{Average workers}} \times 100$$
58. What is the effect of high labour turnover on productivity?
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Productivity falls because new workers are less efficient and require training.
59. What is the role of grievance redressal in reducing labour turnover?
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It addresses employee complaints fairly, reducing dissatisfaction and separations.
60. What is the role of training in reducing labour turnover?
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Training improves skills and career prospects, increasing employee retention.
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